Summers memo
Encyclopedia
The Summers memo was a 1991 memo on trade liberalization
that was written by Lant Pritchett
and signed by Lawrence Summers
while the latter was Chief Economist
of the World Bank
. It included a section that both Summers and Pritchett say was sarcastic that suggested dumping toxic waste
in third-world countries for perceived economic benefits.
After the material was leaked, Pritchett (who worked under Summers) stated that he had written the memo and Summers had only signed it, and that it was intended to be "sarcastic". According to Pritchett, the memo as leaked was doctored to remove context and intended irony, and was "a deliberate fraud and forgery to discredit Larry and the World Bank." This interpretation is strengthened by the final sentence of the leaked excerpt, which points out that "The problem with the arguments against all of these proposals for more pollution in LDCs... could be turned around and used more or less effectively against every Bank proposal for liberalization." That is, it appears to be a Reductio ad absurdum
of the arguments of orthodox free-market economists that were in vogue at the time the memo was written.
Daniel Hausman and Michael McPherson have argued that the satirical section might seem to be based in economics as a science, but in fact contains strong moral premises which cannot be removed and still leave the argument intact. Brazil
ian Secretary of the Environment Jose Lutzenberger
argued that it demonstrated "the arrogant ignorance of many conventional 'economists' concerning the nature of the world we live in."
DATE: December 12, 1991
TO: Distribution
FR: Lawrence H. Summers
Subject: GEP
'Dirty' Industries: Just between you and me, shouldn't the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Least Developed Countries]? I can think of three reasons:
1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.
2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I've always thought that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.
3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostrate[sic] cancer is obviously going to be much higher in a country where people survive to get prostrate[sic] cancer than in a country where under 5 mortality is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.
The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.
Neoliberalism
Neoliberalism is a market-driven approach to economic and social policy based on neoclassical theories of economics that emphasizes the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the...
that was written by Lant Pritchett
Lant Pritchett
-Biography:He was born in Utah in 1959 and raised in Boise, Idaho. He graduated from Brigham Young University in 1983 with a B.S. in Economics, after serving a mission for The Church of Jesus Christ of Latter-day Saints in Argentina...
and signed by Lawrence Summers
Lawrence Summers
Lawrence Henry Summers is an American economist. He served as the 71st United States Secretary of the Treasury from 1999 to 2001 under President Bill Clinton. He was Director of the White House United States National Economic Council for President Barack Obama until November 2010.Summers is the...
while the latter was Chief Economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
of the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
. It included a section that both Summers and Pritchett say was sarcastic that suggested dumping toxic waste
Toxic waste
Toxic waste is waste material that can cause death or injury to living creatures. It spreads quite easily and can contaminate lakes and rivers. The term is often used interchangeably with “hazardous waste”, or discarded material that can pose a long-term risk to health or environment.Toxic waste...
in third-world countries for perceived economic benefits.
After the material was leaked, Pritchett (who worked under Summers) stated that he had written the memo and Summers had only signed it, and that it was intended to be "sarcastic". According to Pritchett, the memo as leaked was doctored to remove context and intended irony, and was "a deliberate fraud and forgery to discredit Larry and the World Bank." This interpretation is strengthened by the final sentence of the leaked excerpt, which points out that "The problem with the arguments against all of these proposals for more pollution in LDCs... could be turned around and used more or less effectively against every Bank proposal for liberalization." That is, it appears to be a Reductio ad absurdum
Reductio ad absurdum
In logic, proof by contradiction is a form of proof that establishes the truth or validity of a proposition by showing that the proposition's being false would imply a contradiction...
of the arguments of orthodox free-market economists that were in vogue at the time the memo was written.
Daniel Hausman and Michael McPherson have argued that the satirical section might seem to be based in economics as a science, but in fact contains strong moral premises which cannot be removed and still leave the argument intact. Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
ian Secretary of the Environment Jose Lutzenberger
Jose Lutzenberger
José Antônio Kroepf Lutzenberger was a Brazilian environmentalist.-Biography:He was born in a German family in Porto Alegre, the capital city of southernmost state of Rio Grande do Sul, as the only son of architect Joseph Franz Seraph Lutzenberger. He graduated in Agronomy at the Federal...
argued that it demonstrated "the arrogant ignorance of many conventional 'economists' concerning the nature of the world we live in."
Text of the Excerpt
The following excerpt has been posted on a number of websites.:DATE: December 12, 1991
TO: Distribution
FR: Lawrence H. Summers
Subject: GEP
'Dirty' Industries: Just between you and me, shouldn't the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Least Developed Countries]? I can think of three reasons:
1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.
2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I've always thought that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.
3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostrate[sic] cancer is obviously going to be much higher in a country where people survive to get prostrate[sic] cancer than in a country where under 5 mortality is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.
The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.
External links
- The Logic of a Free Market Economist, a critique of some of the economic logic in the memo.